This article is going to discuss what is equipment
leasing/financing, what are its benefits, leasing plans and
how it relates to the start up and seasoned business.
Leasing is a form of renting but with a buyout clause at
the end of the lease to take title to whatever we are
leasing. The requirements to get into the lease may be as
low as first and last payment and as much as 25%. Each
situation is different and this offers the start up and
seasoned business a way to invest very little monies into
the business. Additionally, all other monies can be used
for operating expenses such as marketing and other key
areas. Leasing is not a new form of financing but could be
a lending solution to the start up business. The small
sample of type of industries that leasing can be used for
are the following:
Dump,garbage, tow, flatbed, water trucks, over the road
trucks and day cabs, heavy and construction equipment such
as bulldozers, tractors, excavators, skid steer loaders,
backhoes, flatbed, drop deck, refrigerated, dry van
trailers, and industries which include limousines,
limousine and shuttle buses, and machinery and production
equipment.
The benefits of leasing may result in off-balance sheet
financing reporting, tax incentives and conserving cash
flow and preserving lines of credit for working capital
purposes. Many leasing requirements may only require the
initial outlay of first and last rental payment. Most
leases finance 100% of the cost of the equipment such as
soft costs which include shipping, software, training and
installation. Additionally, leasing lets you regularly
upgrade your equipment, eliminating your utilization of
old, outdated equipment and reducing repair options.
Some of the leasing plans available to the lessee are
$1.00, 10% or 20% purchase options as well as Trac Leases
and FMV lease buyouts. Additionally, some lenders offer
seasonal payments, deferred payments for ninety days,
declining payments and half payments for a specified time
period. It is important that the lessee understands all
these different lease plans available as well as the buyout
clauses.
The lessee has many options to consider in negotiating his
lease. He must understand each lender's requirements and
see if it fits within the realm of the lessee's
requirements. Some lenders will accept the start up
business whereas others will not want to lend to this
group. They consider that their risk capital can be
invested in other types of portfolios that can be better
served. Many lenders require full documentation which
includes a couple of years of personal income tax returns,
a personal financial statement, and other underwriters
requirements. However, in the past couple of years, there
is a select group of lenders out there require an
application only program. These lenders have their own
computer scoring model and eliminate the necessary
additional paperwork of other lenders. These application
only programs are usually restricted to the seasoned
business, however there are a few out in the industry which
will work with the start up business as well. The amounts
of the application only program run as high as $250,000 for
the seasoned business and $100,000 for the start up.
Additionally, the lender will lease the qualified asset
probably from 36-60 months and many won't finance any
equipment and commercial vehicles over ten years old.
It is important to understand the lease terms, the rate
factor the lender is charging and the buyout clauses in the
lease to take title. If you anticipate paying off the lease
early, you should consult your lender to ascertain there is
no prepayments for a early payoff. The last thing to
understand that the lessee is going to guarantee the lease.
The last point to consider whether you are a start up
and/of seasoned business due to economic conditions, there
are some unusual specials available for off leases and
repos. The lender has excess inventory on their books that
they need to liquidated or re-leased as quick as possible.
The minimum credit score for the applicant can be as low as
575 and prior bankruptcies may not be an issue in the
credit decision.
Either way, spend your proper time investigating the item
you are looking for to acquire, get the best price that you
can obtain and secure proper financing.
Happy hunting...
----------------------------------------------------
J.M Luna has over thirty years in the financial field. This
includes accounting and taxes, leasing, hard asset money
and working capital loans, and commercial lending. U.S
Corporate Capital Leasing Group can assist the small and
seasoned business in many different types of industries.
http://www.cclgequipmentleasing.com
http://www.cclgequipmentleasing.com/DealerFinancing.htm
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